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10.25 am

Mr. Andrew Tyrie (Chichester): I congratulate my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) on securing today's debate. My interest in this issue goes back to when I was briefly special adviser to the Minister for the Arts in the mid-1980s, but it was revived in the autumn when I found myself in a fourball, playing golf with the finance director

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of one of the major auction houses. He told me in a very matter-of-fact tone of his plans for the auction house to move abroad, with most of its business going to New York and some to Geneva, if the EC proposals were implemented. So he already had contingency plans well in hand. Of course, auction houses want to move outside any zone where European regulation may be imposed on them as a result of the droit de suite.

We have all heard the arguments and almost everyone agrees with them. Clearly, VAT at 5 per cent. will drive away business. VAT also causes enormous administrative hassle. The droit de suite will not have the effects intended for it. It does not benefit artists, but their children or grandchildren as it lowers prices in the primary art market. Like VAT, it also drives business abroad and was rejected as an approach by the Whitford report on copyright on the grounds that it would be unenforceable as some of the art market would go underground and the rest would go abroad. Today, we all agree that droit de suite would be a disaster.

A major task rests with the Government to provide as much information as possible by answering many of the questions that have been raised today. That would enhance the force of the arguments that Britain could make against those measures.

Let me summarise some of the questions that the Government should try to answer. On VAT, what estimate have the Government made of the encouragement of the repatriation of our cultural heritage that resulted from the absence of VAT prior to 1994, and the imposition of the seventh VAT directive? A similar question for the Government is their estimate of the contribution that 2.5 per cent. VAT is now making to the decline in imports since 1994. What is their estimate of the effects that raising VAT to 5 per cent. would have on art imports? Will the Government press the European Commission to publish its promised study on the effects of VAT on art imports? I understand that it was promised by the end of 1998, but it is still not forthcoming. Will the Government try to negotiate an extension of the derogation to keep VAT at 2.5 per cent. at least until the Commission has published its report and its conclusions are digested?

Can the Government confirm that they are still convinced of the harmful effects of droit de suite and its perverse and damaging effects on artists and the art market? Will they carry out a short study on those issues and publish their findings so that there can be complete clarity as to where they stand? Is there any scope for challenging the fact that droit de suite is being brought forward as a trade measure by the European Commission and is therefore subject to qualified majority voting, when logically, as has been pointed out by several hon. Members, it should be treated as a tax measure? Will the Government undertake to make further representations that it should be covered by the unanimity principle? If that is not possible--and perhaps it is not--what efforts are the Government making to try to secure a deal with another major European country in order to secure a blocking minority under qualified majority voting? The Dutch are already allies. Probably there are one or two other allies around--the Irish perhaps. One more major country as an ally would secure a blocking minority.

If we fail in that action, have the Government considered--as my right hon. Friend the Member for Haltemprice and Howden (Mr. Davies) asked a moment

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ago--whether there is any scope for using a Luxembourg compromise? What are the Government's views on the scope for use of a Luxembourg compromise in this case?

I believe that getting the facts into the open as much as possible will do most of the work for all of us in securing, or impressing, Britain's case on the Commission. If our case does not prevail, the losers will be clear--in lost jobs and tax revenue, and the loss of a centre of excellence, which will go abroad.

When I was on the golf course, I was struck by how relaxed the finance director of the major auction house was. Of course he was relaxed: he has his plans to go abroad well in hand. He does not really want to live abroad, but he will do so if necessary. Senior members of auction houses will go abroad. Although thousands of jobs will be lost, those right at the top will not lose theirs. People at the top of auction houses would rather stay in London--as moving would entail an economic cost in upheaval and a risk of losing business--but they are not the ones who will be hit hardest. The people who will be hit hardest are the people of Britain, who will lose jobs and a centre of excellence.

10.31 am

Mr. Geoffrey Clifton-Brown (Cotswold): I have been asked to speak in this debate, and shall make a very short speech. However, before I launch into the debate, I should congratulate my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) on securing this debate, which is timely.

The more one looks into the matter, the more nonsensical it becomes. As from 1 July, the seventh VAT directive will come into operation; tax on imported art from countries outside the European Union will be increased from 2.5 to 5 per cent.; and the derogation agreed on 13 December 1993 will end. Therefore, time is running out on the matter.

I ask the Minister what representations he has made to the Commission; whether a fiche d'impact has been prepared; and whether an impact assessment--which, under the terms of the seventh directive, was supposed to be completed by the end of 1998--has yet been received by the Government? If the Government have not yet received an impact assessment, we should ask the Commission for more time to implement the derogation. I hope that the Minister will be able to refer to that when he replies to the debate.

The British art market is worth £2.2 billion, is larger than the entire music industry market and provides about 50,000 jobs. The two proposals will put at risk a minimum of 5,000 jobs. Britain would lose those jobs essentially because we have the second most important art market in the world. It would be one thing--in a communautaire sense--if those jobs were to be redistributed across other parts of the European Union, but that will not happen. They will simply be lost to Switzerland, New York, Hong Kong and other art centres. The seventh directive therefore seems to be based on pretty thin ice.

We are considering also the droit de suite, which is a French term. I rather prefer the term "artists' resale right", which seems to have a more English ring to it. If we are to have an English tax, let us have an English, not French name for it.

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It would be a different matter also if the tax were to benefit the general art market, but it will not. It will benefit comparatively few young artists' families, who could benefit in other ways. The problem with the droit de suite is that it has very high compliance costs, which alone are estimated to involve an income loss of £68 million.

Implementation of the VAT seventh directive to increase, from 1 July, VAT on imported art to 5 per cent., and the introduction of the artists' resale tax, will have a very damaging affect on the British market. I should therefore like to spur the Minister--in a cross-party and common-sense spirit--to ask the Commission again to re-examine the matter. After all, just before the 1997 general election, Commissioner Monti wrote to my hon. Friend the Member for Esher and Walton (Mr. Taylor) and said that he would very carefully examine the assessment of the measures' impact on Britain. He should live up to his words.

The Minister, the Prime Minister and other ministerial colleagues have already raised the issue with several fellow countries to determine whether a blocking minority might be obtained to ensure that the derogation is continued. I urge the Prime Minister and the Government to use every possible effort to discover whether we cannot find some common cause on the changes, and to ensure that their most damaging aspects are not implemented.

10.35 am

Mr. David Heathcoat-Amory (Wells): On behalf of the House, I should like to thank my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) for securing this debate, and for introducing it with his customary erudition and wit. He spoke not only for his own constituency--although he does represent perhaps the greatest concentration of dealers and auction houses in the world--but for the wider art market, which, as the hon. Member for Linlithgow (Mr. Dalyell) reminded us, extends way north of the border. We are speaking today not only for the great names in the art market but for the associated industries and the network of dealers and galleries across the United Kingdom, which employ upwards of 50,000.

A great British success story faces a serious and immediate threat not from any failing in its own endeavours--it is still the greatest and most competitive art market, certainly in Europe and possibly in the world--but externally, from two imposed taxes. My right hon. Friend the Member for Cities of London and Westminster has succeeded in his debate in uniting the entire House behind his cause. That is never an easy thing to do, but it has been done today. We have heard powerful and well-argued speeches from hon. Members on both sides of the House, representing every sector of opinion in the Chamber.

As we have heard, the threat we face comes from two directions. The first threat is the proposed doubling, from June 1999, of VAT on imported art. I repeat a question that other hon. Members have asked the Minister: where is the European Commission study that is required by treaty law before the change is made?

We know that, even with a VAT increase of 2.5 per cent., damage has already been done. The right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) said correctly that anticipation of the higher rate and of the droit de suite is already doing damage to the London and United Kingdom art market.

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The second threat is the proposed resale levy, or droit de suite, that will be charged on the resale of works of art by any living artist or for 70 years after the artist's death. I believe that that is a fiscal measure--a tax--and should not have been introduced as a trade measure. Whatever it is called, its effects are clear: objects for sale will simply be transferred from the United Kingdom and out of the European Union. The levy savings realised by removing valuable objects for sale to New York will be greater than any possible freight costs or associated transfer charges.

The proposal encompasses not only paintings, but sculpture, manuscripts, tapestries and even photographs. The artist will receive nothing from the proposal. Either sales will be driven underground, by private treaty between individuals, or objects and paintings of any value will be transferred out of the European Union entirely. The proposal is crazy, defies common sense and will not help the European Union in any way. The beneficiaries will be dealers in New York, Geneva, Tokyo and every other part of the world.

The proposal is baffling. Dealers in New York are rubbing their eyes in disbelief at the Marshall aid in reverse. The European Union is proposing a measure that will quite certainly and deliberately transfer business, profit and employment from the European Union to north America. That is being done by the European Commission--supposedly the guardian of European interests. The Commission says that London has an unfair advantage by not having the droit de suite, and that sales are transferred from Germany and France to London. By exactly the same logic, if London has the levy forced on it, sales will be transferred out of the European Union altogether. The Commission is condemned according to its own logic.

My hon. Friend the Member for Esher and Walton (Mr. Taylor)--who comes to these matters with a sympathetic point of view--realises that the Commission has got it badly wrong. Of course, it is not the Commission or the staff in Brussels who will suffer--it is the London art market. It will not be the owners of the auction houses who suffer. The Commission has said, dismissively, that the entire campaign has been got up by Sotheby's, Christies and the big auction houses. They will not suffer--they already have salerooms in New York, and more auctions will be transferred there.

Those who will suffer will be the office staff, the experts, the packers, the porters and the associated industries--the framers, the restorers, the printers of documents and the little galleries associated with those businesses. They cannot move, and they will suffer. The Commission has a harmonising agenda. It does not have in mind the national concerns of member states.

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